Dangers of Extrapolation...

Alison Schraeger writes in the Economist:

Pensions: The retirement solution: If equities continue to perform the same way they have the last ten years...

No, no, no, no no. No. NO!

Naive straight-line extrapolation is rarely your friend.

Over the past ten years...

Cyclically-adjusted real earnings have grown at a rate of 2.5% per year.

Stocks have paid dividends at a rate of 2.5% per year.

Price-to-cyclically-adjusted earnings ratios have collapsed at an average...